Fate Of Key Gas Pipeline In The Balance As Putin, Merkel Begin Meeting

“Russian influence will flow through that pipeline right into Europe, and that is what we are going to prevent,” an unnamed U.S. official told the Wall Street Journaljust as Russian President Vladimir Putin and Chancellor Angela Merkel meet outside of Berlin on Saturday centered on the two countries moving forward with the controversial Russian-German Nord Stream 2 gas pipeline, but also involving issues from the Iran nuclear deal to ending the war in Syria.

Intense pressure from Washington is overshadowing the project, construction of which is already in advanced stages, as the WSJ cites current and former US officials who say sanctions are under discussion and could be mobilized in a mere matter of weeks.

These potential sanctions, ostensibly being discussed in response to US intelligence claims of Russian interference in the 2016 election, could target companies and financial firms involved in the massive pipeline's construction.

This comes after comments from President Trump at the opening of a NATO summit in July made things uncomfortable for his German counterpart when he said that Germany is so dependent on Russia for energy that it's essentially being "held captive" by Vladimir Putin and his government.

"Germany is captive of Russia because it is getting so much of its energy from Russia. They pay billions of dollars to Russia and we have to defend them against Russia,"Trump told NATO chief Jens Stoltenberg at a televised opening breakfast.

The pipeline has been opposed by multiple US administrations, who have long accuse the Kremlin of seeking to accrue political leverage over Europe given the latter's already high dependence on Russian natural gas. The pipeline has been a frequent talking point and target of attacks by Trump, who has threatened to escalate the trade war against Germany going back months if it supported the construction of the pipeline.

He's here! Putin has arrived at Schloss Meseberg, for the first Merkel-Putin bilateral meeting since the annexation of the Crimean Peninsula in March of 2014. pic.twitter.com/MmU6iw0JUx

US officials have also expressed concern that Russia will pull pack significantly from delivering natural gas via Ukraine when its Gazprom tranit contract expires by the close of 2019. Ukraine is currently the chief Russian natural-gas export point to the EU and depends heavily on levying fees on this trade.

Both Russia and Germany have sought to calm US concerns over the Ukraine issue, with Putin himself reportedly telling both Merkel and Trump that he is "ready to preserve" gas transit through Ukraine even after Nord Stream 2 was completed.

US officials speaking to the WSJ, however, downplayed the Ukraine issue, instead focusing on the urgency of allowing such significant and irreversible Russian economic, political, and infrastructural inroads into the heart of Europe.

Richard Grenell, the U.S. ambassador to Germany, told the WSJ, “We have been clear that firms working in the Russian energy export-pipeline sector are engaging in a line of business that carries sanctions risk,”— something which he's repeatedly emphasized with officials in Berlin. President Trump himself has also reportedly raised the issue directly with Chancellor Merkel on multiple occasions.

Nord Stream 2 route, via Gazprom

But for all the shrill US media claims that Trump is somehow doing Putin's bidding, the WSJhas this illuminating line: "Officially, the European Commission, the EU’s executive body, is coordinating the gas-transit talks, but Ms. Merkel also has played a leading role because of her regular contacts and longstanding relationship with Mr. Putin, European officials say."

Meanwhile, it appears that Washington has a losing hand even while making threats of sanctions in an attempt to block the pipeline project.

A European energy executive familiar with the discussions said company representatives had told John McCarrick, deputy assistant secretary in the State Department’s Bureau of Energy Resources, that the five European companies and Gazprom had already provided €5.5 billion ($6.3 billion) in financing and that the project wouldn’t be stopped even if the U.S. were to impose sanctions.

The Nord Stream 2 project was started in 2015 and is a major joint venture between Russia's Gazprom and European partners, including German Uniper, Austria's OMV, France's Engie, Wintershall and the British-Dutch multinational Royal Dutch Shell.

The pipeline is set to run from Russia to Germany under the Baltic Sea - doubling the existing pipeline's capacity of 55 cubic meters per year, and is therefore critical for Europe's future energy needs.

Currently, the second phase involves utilizing an existing pipeline already channelling smaller amount of gas from Russia to Germany. Construction for the second phase started in May of this year.